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Monday, May 23, 2016 4:30:24 PM
The story isn't all bad, though. The company sales, while not booming, have been focused more on higher-margin products in the nine month period. The third fiscal quarter operated almost at breakeven. Cash flow for the nine months would have been reasonably good if the company hadn't been paying its accounts payable more promptly than they had been doing before.
It would have concerned me more that inventory is up, but deferred revenue is also up, meaning that the increased inventory is needed to fulfill purchases in which they've gotten the cash upfront but haven't yet delivered product.
The transactions with the family are somewhat more extensive than I'd like to see. Besides the loans to the company, there are also site-leasing and accounting services relationships. That's a lot of self-dealing when the majority of the shares are held within the family.
It would be a better situation if the company didn't feel compelled to report that they'll probably still be needing more new-money over the coming twelve months. You'd think that since they've gotten really close to breakeven over these most recent three months, they'd be able to generate cash going forward if sales would keep on growing.
As I've written a few times, my overall conclusion is that the company needs to find "friendlier" lenders or find a capital infusion (though at this point, an equity investment would "cost" enough shares so as to create control of the company by the investor). The real question in my mind is why haven't sales been zooming in accordance with the Wells-Fargo industry projection and the company's own guesstimates of a year ago prepared for what I believe was a venture capital conference in San Diego.
By no means is this company a scam, but I think that there is nothing to lose and maybe a lot to gain by the company bringing more of whatever's going on out into the open, e.g. the development of markets in China and Indonesia seems to be doing everything but making reported sales grow rapidly.
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